Alleged Ponzi schemers’ son is prominent businessman

A former state representative and current VP at Florida Crystals Corp. benefited from South Florida’s latest alleged Ponzi scheme, but may not have known it was a scam, according to a bankruptcy trustee overseeing the case of Royal West Properties.

On March 3, the SEC said it filed allegations against Miami residents Gaston E. Cantens and Teresita Cantens, contending they used Royal West to conduct a $135 million Ponzi scheme and affinity fraud targeting Cuban-American investors, primarily from South Florida.

Their son is Gaston I. Cantens, VP of corporate relations at Florida Crystals. Numerous attempts to speak with both father and son have not been successful.

The SEC said children and grandchildren of the elder Cantens couple benefited from the scheme.

The Business Journal obtained documents from the Royal West bankruptcy showing the trustee in the case believed that the younger Gaston Cantens received more than $800,000 in gross payments from the scheme over time, but may only owe half of that.

The trustee, Drew Dillworth of Stearns Weaver Miller Weissler Alhadeff & Sitterson, has also alleged that another son, Bernardo Cantens, and his children, may have received more than $1 million in gross payments, but may only owe half that amount. Dillworth is preparing to finalize settlement agreements with the Cantens sons.

“It appears that (the children) find themselves involved in this matter solely because the parents chose to make gifts to each of them with payments made directly from the debtor – decisions made by the parents alone and not by any of the settlement parties,” Dillworth wrote.

Repayment in the settlements is proposed in two installments from Gaston I. Cantens of $175,000 on or before April 1, with a second payment of $165,000 by April 2011.

The SEC alleged that the elder Cantens couple lured investors by promising that investments in their real estate business were safe and would provide annual returns of between 9 percent and 16 percent.

Royal West acquired property for development and then financed the sale, assigning the note to its investors. They were not registered with the SEC to make securities offerings to investors.

When the real estate market tanked and owners began to default on their mortgages, Royal West’s financial condition crumbled, and the Cantenses began to use new investor money to repay earlier investors, according to the SEC’s lawsuit, which was filed in federal court in Miami.

“The Cantenses used their prominent standing in a close-knit Cuban-American community to ruthlessly exploit vulnerable elderly investors who trusted them with their life savings,” said Eric I. Bustillo, director of the SEC’s Miami regional office, in a news release. “They portrayed themselves as a pious couple closely involved with educational and religious organizations, while, in reality, they were living lavishly off money from defrauded investors.”

Gaston E. Cantens served on the advisory board at Belen Jesuit Preparatory School and brought many friends and associates in as investors in his company. The SEC lawsuit alleges that the Cantenses lured in investors by saying that Jesuit priests and other well-known leaders the Cuban-American community had invested with Royal West.

The Business Journal broke the news of Royal West’s financial implosion in June, with a story about the company being pursued in an involuntary bankruptcy and civil lawsuits.

In August, the Business Journal reported that the Belen Foundation, a nonprofit foundation associated with the school, had invested $600,000 with the Cantenses.

The elder Cantens couple is also alleged to have misappropriated more than $20 million to pay unrelated personal business ventures, pay themselves high salaries and divert money to family members.

Gaston I. Cantens served in the Florida House of Representatives from 1996 to 2006.

The SEC also alleges that the elder Cantenses falsely represented that the promissory notes were collateralized by mortgages or mortgage obligations. However, Royal West did not record as many as one-third of the assignments of mortgage receivables that served to collateralize investors’ promissory notes. Royal West also assigned the same mortgage receivables to multiple investors at the same time.

“The fact that the SEC is taking action is a very good thing for creditors in this case. I’m glad to see it,” said Peter Valori, an attorney with Damian & Valori in Miami, who represents Panama-based Corita Corp., an investor that allegedly lost money in the case.

Valori said the senior Cantens would advertise the Cape Coral properties on television in South America.

The complaint charges the Cantenses with violating the securities registration and anti-fraud provisions of the federal securities laws. It seeks permanent injunctions, sworn accountings, disgorgement of ill-gotten gains and financial penalties against the couple.